The Prudence of Mr Gordon Brown by William Keegan 356pp, Wiley, £18.99

Who can forget Gordon Brown at the Labour party conference in Bournemouth last month, seated, scowling, his arms crossed, while the standing delegates gave Tony Blair his ovation?

We read too much Shakespeare at school, and view our parliamentary politics as dynastic drama, in which an impatient crown prince frets at his long subordination and begins to scheme for the throne he knows he merits, was promised and has earned.

Brown may yet, like another Labour chancellor, Jim Callaghan, make the flit from Number 11 Downing Street to Number 10, or, like Roy Jenkins and Denis Healey, he may not. At the moment, it looks as if Iraq will injure Blair more than the UK economy will embarrass Brown. In the meantime, William Keegan allows us to stand back and make a judgment on what Brown has achieved for Labour both in opposition and during his six years at the Treasury.

The Prudence of Mr Gordon Brown is not a conventional biography. Keegan does not say where Brown was born, ignores his family life and friendships, and skips through the chancellor's early life with the help of Paul Routledge's biography of 1998. What interests Keegan is how, after 18 years in opposition, Labour came to power in Britain in 1997 and what role was played by Brown. And how, by a mixture of successful policies, Tory inaction and international good luck, Brown has helped keep Labour in power.

Gordon Brown was born in Glasgow on February 20 1951, the son of a Church of Scotland minister in Adam Smith's home town of Kirkcaldy in Fife. A star student and leftwing firebrand at Edinburgh University, he spent his early career lecturing and in television, worked his way up the Scottish Labour party and made a name for himself in the Scottish devolution campaign of 1978. Defeated in Edinburgh South in 1979, he was returned for the new constituency of Dunfermline East in 1983. Coming into the House of Commons, he shared offices with the new MP for Sedgefield, Tony Blair. After just four years, Brown was sitting on the Labour front bench as shadow chief secretary to the Treasury. In 1992, he became shadow chancellor under John Smith.

Politically, Brown had passed from the Red Gordon of Edinburgh days, intent on nationalising everything not nailed down, through the usual tergiversations of the Labour reformers of the 1980s: first anti-Europe, then pro-Europe, in favour of fixed exchange rates for sterling, then against them. After Smith's death in 1994, Brown lost the leadership of the party to Blair and not merely because the prime minister is more political, as he showed at Bournemouth. Brown was tarred with his enthusiasm for the European exchange-rate mechanism. (Incidentally, Keegan rehabilitates Norman Lamont as the first of the reasonably competent British finance ministers of the 90s.)

On the famous Brown-Blair dinner at the Granita restaurant in Islington, London, on May 31 1994, Keegan adds little to our knowledge. The succession was not Blair's to give: or rather, he could give it, and Brown could take it, and the party could take it away. The deal that was certainly made, Keegan says, was that "Blair agreed to make Brown a very powerful chancellor, with a remit covering not only the economy but also large areas of welfare and social policy".

Brown knew that Labour was not trusted by the public, or the City, with the public finances. It was Labour governments that had been forced to suspend the gold standard in 1931, devalue in 1949 and 1967, and go cap in hand to the International Monetary Fund in 1976. Brown was determined to break that association but his defeatist remedy - pass sovereignty over money to Europe - was fatally timed to coincide with the monetary chaos of German unification.

Enter Ed Balls, a young leader writer on the Financial Times, who became Brown's chief adviser. Balls had been arguing since at least 1992 that the Bank of England be freed of control from the west end of town, and he convinced Brown that an independent bank need not be a deflation machine of the type run by Montagu Norman in the 20s, but would provide a Labour chancellor with cover in public and the markets for modestly socialistic policies. When Labour at last came to power in 1997, Brown's first act was to pass day-to-day authority over interest rates to a new Monetary Policy Committee.

The granting of operational independence to the Bank of England was a brilliant political coup. Many, even in the Treasury, thought it was a prelude to dissolving sterling in the European single currency but, as Keegan says, "The whole point of the build-up to Bank independence was to give a Labour government a viable macroeconomic policy. If anything, it was even offering an alternative to the ERM and the euro."

Six years on, the euro is off the menu. Helped by disinflation overseas, the UK economy has grown steadily, creating jobs without price pressures. That is not to say that the bank arrangement might not go awry, either through some latter-day Montagu Norman, or to the peculiarly British mixture of rising consumer spending and weakening manufacturing and exports. But so far, in laying the ghost of Labour's financial imprudence, Brown has removed much of the reason for voting Conservative. It is one reason why the Tories are flailing.

Having started so well, why didn't Gordon Brown pick up his egalitarian agenda? In a country starved of public investment since the IMF bailout of 1976, why did Brown not move earlier to bring British schools, transport and hospitals up to continental standards? As a result of his promise to hold public spending for the first two years, spending on capital projects in 1997-2001 was the lowest of any four-year period for 40 years. "When he did take the brakes off after the two-year freeze," Keegan writes, "the machine did not respond - or at least not for a painfully long time, while public dissatisfaction with the railways, the hospitals and the schools grew and grew."

By the time the chancellor opened the seals on spending on schools and health in the 2002 budget, based on a 1p increase in National Insurance from this year, the public infrastructure of the kingdom had become a political liability to Labour. Worst of all, the public stimulus may break through just when the private sector (preceded by a rising stock market) takes off. In that case, there may be a scramble for labour and resources, a rise in the price level and the old interest-rate-and-unemployment medicine.

Like all prudent people, Brown can suddenly throw prudence to the winds, as when he weighed into the Laura Spence debate with an attack on Oxbridge elitism, after the Tyneside comprehensive sixth-former was rejected by Magdalen College, Oxford; or in his feud with Ken Livingstone over the London underground. Did Mr Brown's affair with Miss Prudence go on too long? Or not long enough?

· James Buchan's latest book is Capital of the Mind: How Edinburgh Changed the World (John Murray).